Starbucks: stretching with scale and speed

The Starbucks share price has risen by almost 50% in 2019 with annual revenue growing 8% year on year to $6.82 billion. CNN Business recently observed that “every Starbucks growth strategy is working.”

The core global café business has grown 6%. Starbucks now has 30,600 stores in China and by partnering with Uber Eats and Alibaba it will expand its delivery reach in the United States and China.

Starbucks opened its largest store in the world in Shanghai, staffed by 400 employees.

Starbucks is also rapidly extending its presence in consumer packaged goods (CPG).  The portfolio now encompasses: ‘craft’ iced teas, energy drinks, a sparkling refresher range, Nespresso pods, coffee creamers – alongside Teavana tea, and ready to drink Frappuccinos, Lattes, etc.

Screenshot 2019-08-16 at 16.07.01

What is impressive is that the extension into consumer packaged goods has been delivered simultaneously with core growth. It is therefore worth considering some of the drivers of this CPG stretch success:

1. They know their winning business model

For the core café business Starbucks owns rather than franchises. It is a recognition that it is here that Starbucks builds the brand experience and successful innovation.  As former CEO Howard Schultz put it, “so much of what we’ve succeeded in is based on the values and culture of the company, and I never believed we could do that in the franchise system.”

However, for consumer packaged goods the model changes to licensing and partnership.

With partners such as Pepsico, AB InBev and Nestlé, Starbucks can access CPG capabilities and, in particular, the distribution to dramatically expand their addressable market. Nestlé, for example, provides a diverse urban and rural global distribution network alongside exclusive access to Nepresso and Nescafé Dolce Gusto systems.

The result is a CPG business model that increases brand engagement and is set up to deliver revenue growth with speed and scale – without diluting the focus or investment on global café growth. Starbucks CEO Kevin Johnson explains the model in this CNBC interview clip when announcing the partnership with Nestlé in 2018:



2.  Starbucks cafés build and sustain a brand advantage

Long established consumer coffee brands such as Nescafé or Maxwell House have fallen below the likes of Starbucks and Costa in terms of preference as consumers seek to bring the premium coffee they enjoy in cafés into their homes.

With café innovation and customer insight Starbucks is also developing a pipe-line of branded, proven and familiar café favourites (such as Teavana Passion Tango or Mocha Frappuccino) that have the potential to smoothly stretch to packaged formats. 

Testimony to this was Nestlé’s payment of $7.1 billion to license the Starbucks’ brand for packaged products (such as pods and packed coffee).  That’s quite an investment decision from the owner of the Nescafé and Nespresso coffee brands.

 Nestlé have launched 24 Starbucks products to date, with the brand available for Nespresso and Nescafé Dolce Gusto systems

3.  Partners are aligned and highly incentivised

Having worked with Pepsico in North America for almost 25 years to pioneer the premium ready to drink coffee category Starbucks understands the need for partner alignment and mutual incentives for growth at scale.

For Nestlé the partnership adds a premium coffee brand and strengthens the high margin Nespresso proposition at a time of slower growth and proliferating competition.  Both Nestlé and Starbucks are betting heavily on increasing coffee consumption in China.  With the Asia-Pacific coffee pod / capsule market forecast to approach $6 billion by 2025 the Starbucks rapid café and delivery expansion in the region is very timely.

With AB InBev, Starbucks has again found a partner that is highly incentivised and with leading distribution capabilities.  With consumers turning away from alcohol, Teavana has become the flagship brand for the company’s “beyond beer” growth strategy that is targeting  $1 billion in non-beer revenue.

AB InBev has embraced Teavana as their own brand and the growth ambition is very evident in this BevNET presentation from Beyond Beer Vice President Randy Ornstein.



Starbucks has made decisive choices in business model and strategic partners to enable the stretch to CPG at speed and scale. It serves as a reminder for any brand stretching into new formats or categories to carefully assess their model and partner options alongside the market opportunity.

One thought on “Starbucks: stretching with scale and speed

Add yours

Leave a Reply to José Cancel reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Website Powered by

Up ↑

%d bloggers like this: